The Community Development Finance Association and Social Enterprise UK have called for £300m that is being put into a new government business bank to be funnelled through community development finance institutions.
This week, the government announced the first stage of its £1bn business bank which will help small companies struggling to access finance.
Some £300m will be initially invested into the bank. Ministers expect the first transactions to take place by the autumn, though the bank will not be fully operational until next year.
In a joint statement, Social Enterprise UK and the Community Development Finance Association (CDFA) said community development finance institutions (CDFIs) were the obvious vehicle to ensure the new business bank's funds got to SMEs quickly.
Ben Hughes, chief executive of the CDFA said: “We know that SMEs are struggling to access finance they need to start-up, survive and grow. It is essential that CDFIs now fill this market gap.
"CDFIs have a mission to support their local communities and economies – they exist to lend money in a fair and responsible way to those that need it, such as the sole traders and microenterprises that aren’t a profitable proposition for banks. They already have the expertise, infrastructure and local knowledge to reach small businesses across the country.”
Nick Temple, Social Enterprise UK’s director of business and enterprise, added:
“With many start-up businesses, social enterprises and community groups struggling in the tough economic climate, we must ensure that the £300m allocation through the business bank reaches them. We hope the government channels this finance through CDFIs – lenders that best understand the problems facing social enterprises when it comes to accessing finance, and will campaign for this in our role as chair of the Social Investment Forum.”
Earlier in the year, Sir Stephen Bubb, chief executive of Acevo, wrote a letter to the Cabinet Office ministers, saying that the new government business bank should provide a ring-fenced fund giving out loans to the charity sector.
